Volkswagen AG (ADR) (OTCMKTS:VLKAY), parent of the iconic brands Volkswagen, Audi, Bentley, Bugatti, Lamborghini, and Porsche, is a tough nut to crack. Unfazed by the prolonged recession in Europe, the company is eyeing the position of “world’s largest auto seller” by 2018. It intends to beat Toyota Motor Corporation (ADR) (NYSE:TM) and General Motors Company (NYSE:GM) to establish its supremacy. Despite the challenges in its core European market, the company’s first-half performance and solid July numbers testifies to its underlying strength.
Outperforming the global auto market
Being Europe’s biggest automaker has not been an enviable job for Volkswagen AG (ADR) (OTCMKTS:VLKAY) lately. In the first half, markets in France and Italy shrunk by more than 10%, while Germany and Spain contracted 8% and 5%, respectively. The U.S. and China were the only two bright spots in the global automotive scene, growing by 7.5% and 12% respectively.
According to Volkswagen AG (ADR) (OTCMKTS:VLKAY)’s estimates, it outperformed the 3.6% growth in the global auto market in the first half. Its deliveries were up 5.4% to 4.8 million vehicles. Operating profit, however, fell 12% to €5.78 billion as the company booked charges in its truck business and went through a big product recall in China.
Eyeing the No. 1 spot
Volkswagen AG (ADR) (OTCMKTS:VLKAY) is chasing its goal is to sell 10 million vehicles annually by 2018. In the first half of the year, the company ranked No. 3 worldwide with its global sales tally of 4.7 million vehicles. Toyota Motor Corporation (ADR) (NYSE:TM) sits tight at No. 1 with 4.91 million vehicles, followed by General Motors Company (NYSE:GM) with 4.85 million vehicles.
But Volkswagen AG (ADR) (OTCMKTS:VLKAY) has the fastest growth rate among the three. It grew at a pace of 5.5%, faster than General Motors Company (NYSE:GM)’s 4%, while Toyota Motor Corporation (ADR) (NYSE:TM) posted a decrease of 1.1%.
Volkswagen’s quest for the auto-sales pole position won’t be an easy one — it’s facing off against two formidable rivals.
General Motors Company (NYSE:GM) is banking on its excellent sales trends in the U.S. and China. In the first seven months of 2013, North America’s biggest automaker increased its sales in the U.S. by 9% to 1.65 million vehicles. The company is benefiting from strong demand for trucks, and has recently launched its new pickup models to a fantastic response. July sales were up 45% for Silverado and 49% for Sierra.
General Motors Company (NYSE:GM) is spending $16 billion in the U.S through 2016 as it tries to capitalize on the industry rebound. In China, deliveries were up 11% in June. The company is trying to capture the booming luxury car market through its Cadillac brand.
Toyota Motor Corporation (ADR) (NYSE:TM) has been struggling in China on account of political disturbances between that country and Japan; the company’s sales dropped 5.4% in the first seven months. However, Toyota is planning a comeback in the second half, and it remains confident about selling 900,000 vehicles for the entire year, an increase of 7.1% over 2012.
In the U.S., volumes are up 7.5% for the year, largely on account of a fantastic July in which volumes increased 17.3%. Helped by a weaker yen, Toyota Motor Corporation (ADR) (NYSE:TM) has significantly increased incentives for Camry, which had been showing signs of weakness earlier in the year. July sales have predictably rebounded with a 16% increase, and the company is all set to win the midsize race this year.
China and the U.S. will usher growth
Volkswagen’s hopes of beating its rivals rest on its Chinese and U.S. performance. The company increased its sales by 19% to 1.79 million in China, and by 10% to 356,800 vehicles in the U.S. during the first seven months of the year.